Successful farming industries rely on direct payments

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Published:08:18Saturday 07 July 2018

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There is a core issue here on the future of farm support that will eventually have to come to the surface.

That is the fact that the average direct payment here is far ahead of the UK average. There are sound, historic, reasons for that situation but from a Westminster perspective the justification for retaining that differential is less clear.

The government has effectively guaranteed payment levels through the Brexit transition period. It has not however said whether that will be in UK overall budget terms or at an individual farm level. It has made no comment on inflation or whether the match will be to present or future CAP spending. As a long term prospect, while the amount coming here may be modest in a UK context, it is hard to see a situation where a minister in London would seek to maintain such a huge differential. The DEFRA Secretary, Michael Gove, has already told the Scots their battle for a reallocation of the CAP funds, which they believe were wrongly used to boost direct payments elsewhere, is over. That is positive news here, since we were the target of the Scots seeking a payments boost, but it underlines how easily controversial decisions are taken in London.

The task of winning that battle is made all the harder by the absence of a minister here. With the best will in the world civil servants cannot achieved what a minister would achieve. Even with local ministers Scotland and Wales are struggling to have their views on farm support listened to at Westminster. Agriculture is peripheral to the Brexit debate within the government and Conservative party, and Gove has bigger political fish to fry. What is needed is a confirmation from government that its funding commitment over the transition to a new payments model will be based on individual rather than national payments. The best hope of that being secured is if it opts for a devolution-based approach, but without an executive that too would bring problems here.

The real message that needs to be taken on board in London is that support for agriculture is not a bolt-on extra, but the norm in every developed country. Farmers should not be expected to feel grateful for Treasury generosity towards their industry. Around the world governments have a simple choice – consumers can pay what they do now for quality food because of subsidies, or they can save a little on their taxes and pay the full economic cost of producing food. They cannot have both, and politicians in London need to accept that.

The post-Brexit financial boost, promised at the time of the referendum, is a myth. Additional funding for the NHS will come from general taxes, rather than money saved from contributions to Brussels. Add in other priority areas for the government, including defence, education and the protected overseas aid budget and agriculture is certainly a soft target for cuts. For that reason the most recent report from the Organisation for Economic Cooperation and Development (OECD) on global farm support should be compulsory reading for urban-focussed politicians at Westminster. Around the world from 2015 to 2017 annual spending on farm subsidies was £470 billion. The OECD says 80 per cent of this went to individual farmers. Two-thirds of support was in a form that distorted trade, by insulating farmers from the consequences of production decisions.

The most generous, when it comes to subsidies, were again super-rich Iceland, Norway and Switzerland. This is small scale and has no global impact. Japan is also high on the list of those generous with subsidies, as is China. New Zealand and Australia remain the only big agricultural players to offer almost no support. The EU is slightly above the OECD average, and well ahead of the US and Canada.

The detail is less important than the fact that agricultural support is universal and the scale is unlikely to change. Politicians at Westminster need to understand that regardless of the method of support, the key remains putting the necessary funds into the budget. This is what happens in every developed economy, and the UK cannot be different. Brexit is a golden opportunity to change our support structures away from the failings of the CAP. The EU-27 cannot break free of the political bonds of the past, but with the right incentives we can. That must begin with an acceptance that agricultural support is the norm for every country that wants a successful farming industry.